Recently Yahoo News on-line reported the following:
Japan's historic economic comeback shows just how screwed
China is right now (1/2)
Business Insider -Linette Lopez
Sun, March 31, 2024 at 10:57 a.m. PDT
Japan's long-comatose economy is finally showing proof of
life.
After a catastrophic real-estate implosion in the early
1990s, the country's economy spent the next three decades shrinking. Households
and businesses had to spend their money paying off debt, which prevented them
from investing or starting new ventures. Wages were stagnant. And the economy
slid from the world's second largest to its fourth. Animal spirits were
neutered.
Eight years ago, policymakers tried to bring them back by taking interest rates into negative territory. For a while, it was slow going. But Japan's economy — the long-unconscious patient — recently started to wiggle its toe. Japan's labor unions in March scored the biggest wage increase for workers in decades. The country's stock market is ripping; the Nikkei recently exceeded the all-time highs it set 34 years ago. Analysts at Goldman Sachs are telling clients there's still more upside to be had as corporate-governance reforms and a new era of sustainable inflation take hold. The Bank of Japan this month hiked interest rates above zero for the first time since 2007, a sign of confidence in the country's recovery.
Like Japan in the 1990s, China is now staring down a property-market collapse. Real estate once accounted for 20% to 30% of the country's GDP, and all aspects of China's economy — local governments, households, the banking system — depend on money from the property market to survive. After decades of overbuilding and speculation, this massive debt pile is coming due. This is what we now recognize as a "balance-sheet recession," a term the Nomura economist Richard Koo coined in 1997 to describe Japan's economic sluggishness as society paid down debt from its property-market collapse. Now, Koo says, Chinese academics and policymakers are flocking to Japan to glean some kind of wisdom from the country's experience.
"I tell them there's a big difference between Japan 30 years ago and China now. When we got into this balance-sheet recession, no one knew what kind of disease we contracted," Koo told me. "We were all lost for a long time."
At a glance, the encouraging news from Tokyo should give Beijing hope. It shows that where there is a will, in even the direst economic circumstances, there is a way. But a closer look at the road Japan took to revive its economy darkens the picture. Japan's recent success stems from a decadeslong effort from policymakers, careful negotiations with its trading partners, and the strange conditions Japan's economy found itself in along the way. All of this will be nearly impossible for Beijing to re-create — at least, not without pissing off policymakers from Brussels to Brasília.
What happened in Japan
The difficulty of digging out of a crisis like Japan's is
that the factors that contributed to the downturn are self-reinforcing. When
real-estate values collapsed, Japanese households saw their wealth take a
nosedive, which pushed them to save more and focus on paying down debt. With
fewer consumers going out and spending, companies slashed prices to woo what
few yen were going around, which led to economywide deflation. This has the
perverse incentive of making saving seem more attractive: Why invest in something
or buy something now when it may be cheaper in a year or two? Corporations had
to stay innovative, pay down debt, and fight for consumer dollars all at once,
but those tight margins meant there was little room for worker raises — further
constraining what households had to spend. The whole economy seemed stuck in a
trap.
Eventually, the Japanese government and the Bank of Japan ramped up their efforts to kick-start the economy. The bank cut interest rates into negative territory, effectively forcing people to pay money to keep cash in their savings. And Shinzo Abe, Japan's former prime minister, launched a campaign of "Abenomics" that included massive stimulus packages designed to inspire business and household spending. After all this hard work, Japan is starting to show signs that better days are ahead. Koo says executive culture is shifting toward more of an appetite for debt — more risk — and that means more investment in new projects. He compared the C-suite's caution to the skepticism Americans who lived through the Great Depression in the 1930s felt toward debt — a form of PTSD. But, slowly, things are changing.
One reason animal spirits are stirring in Japan is that the yen has been getting crushed against other major currencies since 2022. As a country's currency becomes cheaper, its exports become more attractive to the rest of the world — which helps explain why Japan's exports hit a record in 2023 — and makes corporations that depend on exports look as if they have healthier balance sheets.
"This has made Japan attractive for foreign investors, and the stock market has done well," Koo said. But a weaker yen reduces the purchasing power of those using it domestically.
"For average Japanese people living in Japan, this has not been great news at all," he told me. "What's being said outside Japan and how it feels inside are very different."
Tokyo knows it's not out of the woods yet, but economists
largely agree that early this year was the time for Japan to strike — to pull
itself out of negative interest rates, even if the economy is still finding its
footing.
"Initially driven by cost-push factors, inflation is
becoming demand-driven with the output gap closed and labor shortages
intensifying," researchers at the International Monetary Fund wrote in a
recent report. The biggest danger, they said, is that inflation has eaten up
what little growth the country has. Luckily, though, the rest of the global
economy seems like it's in shape to support the country by buying Japanese
goods and mobbing the country with a record number of tourists. That all must
hold if we're to see Japan close the chapter on its economic fall from grace.
And so, toward the end of Japan's most arduous phase of debt repayment, as
companies looked healthier and the stock market much cheaper thanks to the currency,
the world stepped in with more cash. None of it was a pretty process, but
restructuring never is.
If China tried to replicate the procedure, though, it would
look even uglier.
(to be continued)
Translation
日本長期低迷的經濟終於顯示出生機。
在 20 世紀 90 年代初發生災難性的房地產崩盤之後，該國經濟在接下來的三十年中一直在萎縮。 家庭和企業不得不花錢償還債務，這阻礙了他們投資或創辦新企業。 工資停滯不前。 經濟也從世界第二位滑落至第四位。 動物精神被絕育了。
八年前，日本政策制定者試圖透過將利率降至負值來恢復經濟。 有一段時間，進展緩慢。 但日本經濟- 長期處於昏迷狀態的病人 -它的腳趾最近開始郁動。 日本工會三月為工人實現了幾十年來最大的薪資漲幅。 該國股市正在迅速爆發； 日經指數最近突破了
34 年前創下的歷史新高。 高盛分析師告訴客戶，隨著公司治理改革和可持續的通膨新時代的到來，可以有更多上漲空間。 日本央行本月將利率自 2007 年以來首次上調至零以上，顯示出對該國復甦的信心。
隨著東亞投資組合的增長, 這種反彈在美國引發了一些溫和的歡呼，主要限於華爾街的拍拍背和呼叫「偉大的區域，老友記」。 但在中國，人們密切關注日本從這種長期低迷狀態中的復甦。
與 20 世紀 90 年代的日本一樣，中國現在正面臨房地產市場的崩潰。 房地產曾經佔中國GDP的20%到30%，中國經濟的各個方面 - 地方政府、家庭、銀行體系 - 都依賴房地產市場的錢來生存。 經過數十年的過度建設和投機，巨額債務即將到期。 這就是我們現在所說的 “資產負債表衰退” ，野村經濟學家 Richard Koo 在1997年創造了這個術語，用來描述日本經濟因房地產市場崩潰而償還本金債務而出現的低迷狀況。 Koo 說，現在，中國學者和政策制定者正蜂擁着日本，從該國的經驗中汲取某種智慧。
Koo 告訴我說: 「我告訴他們，30 年前的日本和現在的中國有很大的不同。當我們陷入資產負債表衰退時，沒有人知道我們患上了什麼樣的疾病」; 「我們都迷失了很長一段時間。」
驟眼看來，來自東京的令人鼓舞的消息應該會給北京帶來希望。 它表明，只要有決心意，即使在最嚴峻的經濟形勢下，也有辦法。 但仔細觀察日本振興經濟的道路，情況就會變得更為黯淡。 日本最近的成功源於政策制定者數十年的努力、與貿易夥伴的認真談判以及日本經濟一路走來所遇到的奇怪狀況。 所有這一切對北京來說幾乎不可能重現 - 至少，這會無可避免地激怒從布魯塞爾到巴西利亞的政策制定者。
日本發生了什麼事
擺脫日本這樣的危機的困難在於，導致經濟衰退的因素是會自我增強的。 當房地產價格暴跌時，日本家庭的財富急劇下降，這促使他們增加儲蓄並專注於償還債務。 隨著外出消費的消費者減少，企業紛紛大幅降價以吸引流通中的少量日圓，這導致了整個經濟領域的通貨緊縮。 這有一種反常的誘因，讓儲蓄看起來更有吸引力：為什麼要現在投資某樣東西或購買某樣東西，一兩年後它可能會更便宜？ 而企業它必須保持創新，償還債務，並同時爭取消費者的錢，而利潤微薄意味著工人加薪的空間很小，這進一步限制了家庭的支出。 整個經濟似乎陷入了陷阱。
最終，日本政府和日本央行加強了刺激經濟的力道。 該銀行將利率降至負值，實際上迫使將現金保留在儲蓄中的人去付出成本。 日本前首相安倍晉三發起了一場「安倍經濟學」運動，其中包括旨在刺激企業和家庭支出的大規模刺激方案。 經過所有這些努力，日本現在開始有跡象顯示出更好的日子即將到來。 Koo 說，高階主管文化正在轉向對債務的更大胃口 - 更高的風險 - 這意味著對新項目的更多投資。 他將最高管理層的謹慎與經歷 20 世紀 30 年代大蕭條的美國人對債務（一種創傷後壓力症候群）的懷疑態度進行了比較。 但是，慢慢地，事情在改變中。
Koo告訴我: “我認為這是一個好兆頭” ， “但日本人非常謹慎，尤其是與美國人相比。”
動物精神在日本掀起的一個原因是，自2022 年以來，日圓兌其他主要貨幣一直在貶值。隨著一個國家的貨幣變得更便宜，其出口對世界其他地區變得更具吸引力 - 這有助於解釋為什麼日本的出口在2023 年創歷史新纪錄，並使依賴出口的企業看起來擁有更健康的資產負債表。
Koo 說: 「這使得日本對外國投資者有吸引力，股市也表現良好」。 但日圓疲軟降低了國內使用日圓的人的購買力。
他告訴我: 「對於生活在日本的普通日本人來說，這根本不是一個好消息」; 「日本國外的說法和日本國內的感受非常不同」。
東京知道它還沒有脫離困境，但經濟學家基本上一致認為，今年年初是日本採取行動的時候 - 即使經濟仍在探求站腳點，也應該擺脫負利率。
國際貨幣基金組織的研究人員在最近的報告中寫道：「最初通貨膨脹是由成本推動因素帶動的，隨著產出缺口的縮小和勞動力短缺的加劇，現在正在變得由需求帶動」。 他們說，最大的危險是通貨膨脹吞噬了該國僅有的一點成長。 不過，幸運的是，全球經濟的其他部分似乎已經準備好透過購買日本商品, 並創造紀錄數量的遊客來支持該國。 如果我們要看到日本結束其經濟衰退的篇章，這一切都必須繼續堅持下去。 因此，在日本最艱難的債務償還階段即將結束時，隨著公司看起來更健康，股市因貨幣而便宜得多，全世界都以更多現金介入了。 這一切都不是一個美好的過程，重組從來都不是一個美好的過程。
不過，如果中國試圖複製這項程序，情况看起來會更加醜陋。
(to be continued)
Note:
1. Animal spirits is a term
coined by the famous British economist, John Maynard Keynes, to describe how
people arrive at financial decisions, including buying and selling securities,
in times of economic stress or uncertainty. In Keynes’s 1936 publication,
The General Theory of Employment, Interest, and Money, he speaks of animal
spirits as the human emotions that affect consumer confidence. Today, animal
spirits describe the psychological and emotional factors that drive investors
to take action when faced with high levels of volatility in the capital markets.
(https://www.investopedia.com/terms/a/animal-spirits.asp)
2. A paydown is a reduction in the overall debt achieved by
a company, a government, or a consumer. In business, it often involves issuing
a round of corporate bonds for less than the previous issue. In that way, the
company reduces its debt load. For a consumer, a paydown can mean making a
larger payment on a mortgage, car loan, credit card, or any other kind of debt
to reduce the outstanding principal. (https://www.investopedia.com/terms/p/paydown)
3. C-suite refers to the executive-level managers within a
company. Common c-suite executives include chief executive officer (CEO), chief
financial officer (CFO), chief operating officer (COO), and chief information
officer (CIO). (https://www.investopedia.com/terms/c/c-suite.)
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